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Sunday, March 27, 2016

China has offered Bangladesh soft loans of $15-20 billion to help it expand
railway networks across the country.

Officials of the Chinese embassy in Dhaka placed the loan proposal at a
high-level meeting with Bangladesh officials at the Prime Minister's Office in
January, railways ministry sources told The Daily Star.

Later that month, the PMO formed a three-member committee, headed by an
additional secretary of the railways ministry, which primarily identified eight
projects involving $10.79 billion.

Railways ministry officials said they sent a list of the projects to the
Economic Relations Division of the finance ministry last month for holding
discussions with the Chinese government.

Wishing anonymity, a finance ministry high-up said the ministry already sent
a list of four projects to the Chinese government for assistance.

The railways ministry has signed memorandums of understanding with China
Railway Group Ltd for the two Padma bridge rail link projects.

According to finance ministry officials, China has invested trillions of
dollars against treasury bonds in the US and countries in Europe.

As interest rates on those bonds continue to fall, China is now eager to
invest in developing countries which will bring it profits through interest and
also help it expand its businesses.

A finance ministry official said Bangladesh wants to avail itself of the
opportunity, but on easier borrowing terms.

The ministry has been in talks with the Chinese government for softening the
terms and conditions of the loans for the railway sector, said the official,
asking not to be named.

At present, China charges 2 percent interest on soft loans with a repayment
period of 15 years, including five years of grace period. The loan also carries
0.2 percent commitment fees and 0.2 percent management fees.

In case of such loans, the Chinese government selects the contractor, and
stipulates that all materials for the projects have to be purchased from China.

On April 12, Finance Minister AMA Muhith held a meeting with Chinese
Ambassador Ma Mingqiang and requested the envoy to take steps to soften the
terms of the loans.

The minister later told reporters that China had assured it would lower the
interest rate on the loan. But the rate was yet to be fixed.

Muhith said the Chinese ambassador told him that China had huge funds and
wanted to invest those under softer terms.

The minister said China has always assisted Bangladesh, and the cooperation
reached a new height following the Bangladesh prime minister's visit to China
in June last year.

He said they already gave the Chinese government a list of projects for
getting loans.

On the issue, Zahid Hussain, lead economist at World Bank's Dhaka office,
said, “Development of the railways is very important for building an
environment-friendly internal transportation system in Bangladesh. The
financial needs are massive. So in principle, getting financing from China is
highly welcome.”

“It will be important to make sure that the terms and conditions are
affordable and transparent and that the procurement system ensures value for
money for Bangladesh,” Zahid told this correspondent.